Ten Things About American Labor Law（8）Who is required to pay overtime pay？
Overtime Pay might feel like a leftover concept from the manufacturing era, but in today’s information age where everyone works in offices, it’s rarely discussed. Why do some employees have strict clock-in/clock-out rules, while others face no pay deductions for lateness or earn no extra wages for weekend work? What determines whether an employee is paid an annual salary or hourly wages with overtime? Can employers simply label everyone as "Annual Salary Base" to avoid paying overtime?
Today, let’s unravel the U.S. Overtime Pay system.
10 Things About U.S. Labor Law: Stories Between Employers and Employees
By Attorney Liu, U.S. Corporate Lawyer in Silicon Valley | Decoding the Legal Logic Behind Workplace Rules
1. Not All Employees Are Entitled to Overtime Pay
To understand U.S. Overtime Pay , you must first grasp two concepts: Nonexempt Employee and Exempt Employee. The terminology alone can be confusing. These categories were created by the Fair Labor Standards Act (FLSA) passed in 1938, which established two core protections:
Minimum Salary Standard
Overtime Pay
Here’s the twist: "Exempt" means these employees are exempt from FLSA protections.
Simplified Logic:
FLSA protects Blue Collar workers (Nonexempt Employees), guaranteeing them minimum wage and overtime pay.
White Collar workers (Exempt Employees) are excluded from these protections.
2. Wage Calculations for Blue Collar Workers
If you’re a Blue Collar worker (i.e., a Nonexempt Employee under U.S. labor law), your pay must include Overtime Pay (Overtime Pay).
2.1 Federal Rules (FLSA)
So let's start with the federal regulations, which we talked about earlier, the Fair Labor Standards Act（FLSA）.So let's start with the federal regulations, which we talked about earlier, the Fair Labor Standards Act （FLSA）
2.2 State Rules (California Example)
In addition to federal baseline regulations, economically developed states often establish their own rules. Relatively remote states typically do not create additional regulations and directly adopt federal laws.
Let’s examine California—the most representative state and the strongest in employee protections nationwide. Just from the Minimum Salary, we can see that California’s Minimum Salary has surpassed twice the federal level, placing it in an entirely different tier. Additionally, California not only has a 1.5x wage tier but also a 2x wage tier.
3. Salary Calculations for White Collar Workers
White Collar roles are typically salaried (Annual Salary Base), but not everyone can be arbitrarily classified this way. To qualify as Exempt Employee (White Collar), three conditions must be met:
3.1 Annual Salary Basis
Payment is calculated annually, even if disbursed monthly or biweekly.
3.2 Minimum Salary Standard
In addition to these criteria, to qualify as a White Collar employee, the job responsibilities must meet specific requirements, such as roles in Management, Executive, or Administrative positions (e.g., department managers). Another category is Professional, which essentially refers to Individual Contributors. The key characteristic of these roles is that they require autonomous decision-making, unlike assembly line workers or service staff who perform repetitive, mechanical tasks. To be classified as White Collar, employees must demonstrate a degree of proactive judgment.
From these three criteria, we can see that the first two (salary and duties) are objective numerical thresholds, but the third (autonomy) is more ambiguous. In practice, real-world classifications often contradict public perceptions. Let me provide examples:
Law firms: Licensed attorneys are White Collar, while unlicensed secretaries or assistants are Blue Collar. Even though both work in offices, this distinction exists. This is why in U.S. law firms, partners often rush to send assistants home by 6 PM to avoid Overtime Pay claims.
Hospitals: Doctors are White Collar, but nurses are Blue Collar. This explains why U.S. nurses earn high incomes—largely through Overtime Pay.
Schools: Kindergarten, elementary, middle, and high school teachers are Blue Collar, paid hourly with Overtime Pay for work beyond 8 hours. Only university professors qualify as White Collar and receive annual salaries.
Corporations: Software engineers are White Collar, while receptionists and general HR (Human Resources) staff are Blue Collar. However, an HR Director (HRD) is White Collar.
Restaurants: Regular cooks are Blue Collar, but executive chefs are White Collar. Servers are Blue Collar, while a restaurant manager’s classification depends on their duties: if they fill in as servers during shortages, they’re Blue Collar; if their role is purely supervisory, they’re White Collar.
Surprised? Shocked?
As an employer, you must clarify whether your employees are White Collar or Blue Collar. Never assume it’s safe to offer an Annual Salary only to face a labor board lawsuit later, where the employee claims unpaid Overtime Pay. Of course, I trust none of you—my audience, the world-changing founders following Attorney Liu—would make such a mistake.
10 Things About U.S. Labor Law: Stories Between Employers and Employees
By Attorney Liu | See you next time.
